Artificial Intelligence in Logistics Function: Current Applications and Challenges

This report highlights the current applications of artificial intelligence in logistics function of Fonterra and DHL. It also covers the benefits and challenges of applying artificial intelligence in logistics function. The report discusses the meaning of artificial intelligence, its benefits and challenges to logistic function, and its current applications in logistics function. It also provides recommendations for Fonterra and DHL to improve their logistics function through the application of artificial intelligence.

Supply Chain Management 0
Supply Chain Management
Student’s Name
9/29/2019

Supply Chain Management 1
Contents
Introduction................................................................................................................................2
Meaning of artificial intelligence...............................................................................................2
Benefits of artificial intelligence on logistics function..............................................................4
Challenges of applying artificial intelligence in logistics function............................................7
Current applications of artificial intelligence in logistics function of Fonterra.........................8
Recommendations....................................................................................................................10
Current applications of artificial intelligence in logistics function of DHL............................10
Recommendations....................................................................................................................12
Conclusion................................................................................................................................12
References................................................................................................................................14

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Introduction
The globalization of the business has increased the complexity in the business environment
and has developed the emerging need for the business to maintain its competitive edge over
its competitors. In order to maintain a competitive edge, it becomes vital for the organization
to implement artificial intelligence and allows the automation of the business process
(Krishnamoorthy and Rajeev, 2018). This will help the business in learning and examining
the unexpected problems in the external environment. It will help in structuring the massive
data and deliver maximum satisfaction to the customers. It will improve the supply chain and
will help the organization in fulfilling the fluctuating expectations of the consumers (Russell
and Norvig, 2016)
The additional paragraphs of the report will highlight the meaning of artificial intelligence
and its benefits and challenges to logistic function. It will also cover the current application of
artificial intelligence at the logistics function Fonterra and DHL. Further, it will reflect upon
the recommendations of the application of logistics functions on Fonterra and DHL.
Meaning of artificial intelligence
The term artificial intelligence is defined as a simulation of the human intelligence procedure
by machines specifically the computer systems. It includes procedures like learning in which
the focus in acquiring the new information and developing the rules for using the
information, reasoning, and self-correction. It comprises various tools including mathematical
optimization, methods based upon economics and probability and the versions of search. The
artificial intelligence system encompasses of agents and their environment. The agent may be
a human or robot that perceives the environment by using its sensors and acts upon that

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environment through effectors. The agent comprises the ability to set goals and achieve them.
It is able to make predictions of the uncertainties existing in the environment (Lu et al, 2018).
The main approach of artificial intelligence is to design a robot, computer or a product that
thinks in the same way as a smart human thinks. It involves the study of how the human
thins, solve the problem, learn, decides and work. The adoption of artificial intelligence
develops the ability to interact with the real world by perceiving and understanding the
situations. It aims at modelling the external environment by analyzing the unexpected
problems and solving them through effective planning and decision making. Through the
application of artificial intelligence, the organizations enable themselves to learn and be
updated. It allows the company to develop to make intelligent computer programs (Strong,
2016).
It allows the company to make rational decisions based upon the previous data record. It aids
the company in reducing the chances of error and allows solving the complex calculations
through the use of algorithms. The demands of the business are fulfilled without any delay.
The computer programming dos not get wear out easily and are able to perform the complex
job roles with ease. It is used by the advance organization to catch the frauds and brings
efficiency in the operations of the business. It is used to interact with the users and save the
need for human resources (Gladkov, Gladkova and Legebokov, 2015)
Artificial intelligence does not possess emotions and takes the rational decisions that enhance
the productivity of the company. They do not take the emotional decisions and do not get
distracted from any sort of emotions however the productivity of the organization is not
hampered. Application of the computer programs helps the company in performing the
repetitive jobs without the danger of error and also allows carrying out dangerous tasks with
adjustment of the parameters (Cockburn, Henderson and Stern, 2018).

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Implementation of artificial intelligence at the organization will allow bringing efficiency at
the organization through continuous working without any breaks and efficiently analyses the
external factors that may lead to unexpected problems in the organization. Fitting of the pre-
defined algorithms helps the company in effectively handling of the risky situations and
ensure the survival of the business (Cockburn, Henderson and Stern, 2018).
It is essential for organizations to implement artificial intelligence because it allows merging
large amounts of data with fast and iterative processing and intelligent algorithms. The
software learns automatically by recognizing the data. The artificial intelligence used by the
organization includes digital assistants, robots and chatbots (Li and Du, 2017).
It has become imperative for the organizations to implement artificial intelligence because it
allows unleashing the actionable insights and structures the massive data. It helps the
company in gaining new insights and transforms the business decisions for the improved
outcomes. It helps the business in sustaining its competitive edge over its competitors and
achieves efficiency in operations. The application of automated process and codification of
the business logic creates a transformational impact upon the business and enables the
company to maximize its profitability (Jackson, 2019).
Benefits of artificial intelligence on the logistics function
It is analyzed that the implementation of artificial intelligence helps in enhancing the logistics
functions and increase the sales and marketing of the organization. The following paragraphs
will represent the benefits of artificial intelligence on the logistics.
Predictive Analytics

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It is analyzed that the adoption of machine learning models adept in predictive analysis of the
demand forecasting. Effective demand forecasting helps in analyzing the demand of the
customers and optimizing the supply china process. It will enable the company to handle the
inventory levels and reduce the holding cost through accurate demand forecasting. It analyses
the hidden historical data of customers and correlates the purchasing behaviour of the
customers with the changing weather patterns (Kayikci, 2018).
Inventory Management
Artificial intelligence helps in enhancing the computer vision capabilities of the ERP systems
and machines. It helps in enabling the computers to see, identify and process images.
Machine learning has developed feasibility and has made easy classification of the images
with a higher degree of accuracy. The efficiency in the computer vision helps in more
accurate management of the inventory and also handles the issues in supply chain
management (Li et al, 2017).
The application of cognitive inventory management allows the business to decrease its
attention to the routine tasks and involves in more strategic planning. It allows the company
to manage the diverse systems and processing terabytes of data from millions of transactions
(Li et al, 2017).
Transportation network design
The application of artificial intelligence at transportation improves public safety by
improving the tracking of crime data in real time. It helps the company in utilizing accurate
prediction methods and simplifying transportation company planning. The designing of
automation vehicles provides speedy delivery of products and enables the company in

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increasing its productivity. It streamlines traffic patterns and provides pedestrian safety to
reduce traffic accidents (Klumpp, 2017).
Optimization of procurement management
The usage of the chatbox has allowed the organization to improve its supply chain
management by providing instant information on the availability of stock, shipment status,
stock prices, and other procurement queries. It improves procurement management and
allows the staff to focus more on value-added tasks (Klumpp, 2017).
Automated Quality Inspections
The automation of the quality inspects reduces the delivery of faulty goods to the customers.
It allows managing the superior quality of the products and ensures that the suppliers meet
the compliance standards.
The application of artificial intelligence has helped in refining the logistics of the
organization by gathering the bid data and optimizes the future performance of the
organization through accurate demand forecasting and ensuring transparency in the supply
chain of the organization. It allows the business to be proactive in determining the tool that
improvises the network planning and reducing the operational cost of the organization
(Klumpp, 2017).
The increasing use of machine models enables the company to gather large data and select
the supplier that will aid the company in improving customer experience. It will improve the
production and scheduling planning and will boost the productivity of the organization.

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Challenges of applying artificial intelligence in the logistics function
It is analyzed that increased investments upon the artificial intelligence lead to the creation of
the other algorithms that are auto-executed and creates difficulty for the AI engineers to
quickly untangle the nuts and bolts of these AI-generated algorithms. The addition of the
automation vehicles involves complex systems including sensors that are built with AI
Algorithms and helps in analyzing the behaviours of the human drivers. It increases the risk
because any false prediction may prove fatal for human drivers and also increases the risk of
weak security protocols. This, in turn, affects the performance of the company and increases
the risk of hacking of private information (Lau and Lim, 2017).
The application of artificial intelligence involves complex processes and increases the cost of
maintenance of the machines and the addition of the algorithms. It develops the need for the
company to make the updation and invest the amount in the purchasing of huge machinery.
The application of computer systems does not allow thinking something new and improving
the services delivered by the company. It performs repetitive job roles (Lau and Lim, 2017).
The use of artificial intelligence does not improve the logistic function with experience
because it involves the application of a repetitive job. They are not able to predict the
difference between the hardworking and inefficient individual and does not commit
themselves as the human shows its dedication towards the performance of the job roles. They
cannot perform the task of creativity because the machines perform in accordance with the
command inbuilt. It does not improve the efficiency of the logistic function with the passing
of experience (Goldstein, Navar and Carter, 2016).
It also impacts the organization's culture because the employees are not provided with the
training to advance the skills and lead to the situation of unemployment. The logistics
function of the organization gets complex with the application of artificial intelligence

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because it designs the new job roles and expectations for the planners, schedulers, analysts,
analytics professionals. It becomes difficult for AI engineers to perform a complex role in an
unpredictable environment. The managers do not possess the capabilities to handle the
potential obstacles and affect the logistic function of the company. Any faults in prediction
may affect the whole business performance and increase the risk of failure (Goldstein, Navar
and Carter, 2016).
Current applications of artificial intelligence in the logistics function
of Fonterra
In order to improvise the supply chain traceability and transparency, Fonterra uses blockchain
technology to change the economy and deliver more worth to the consumers. It allows the
company to develop the food quality and ensures safety standards across the supply chain of
the company. Through the adoption of block chain technology, the company has developed a
globally respected framework that allows the company to gain the confidence of the
customers and enhance the reputation of the business by protecting the brand image from the
traceability of products (Jouanjean, 2019).
It is analyzed that the agriculture industry faces the challenge of food fraud with the growing
complexities in the supply chain and affects the brand status of the company. However, the
company has adopted the blockchain technology framework to give end-to-end traceability
and transparency all through the supply chain and gains the assurance of customers and
builds a reliable trading environment through the Alibaba’s Tmall global platform. The
company develops the authenticity of products through the development of QR codes and
also verifies the ongoing report throughout the product’s lifecycle. The adoption of the

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blockchain technology allows the company to authenticate, permanently record and provides
the ongoing report for the transfer of ownership of goods (Fonterra, 2018).
Fonterra has also developed an “amp” that will allow the employees to spend a third of their
time on the projects outside their job roles. This is considered an innovative approach that
allows changing the face of employment in the Co-op. It will allow the employees to choose
the internal project based on their skills and expertise. It is a web-based app under which the
employees at Fonterra create their profile and matches their expertise and experience to
listings on internal projects. This allows the employees to build their careers by enhancing
their capabilities and helps in engaging the employees. It creates a higher level of satisfaction
and allows the company to bring innovative ideas that will boost the productivity of the
company (Fonterra, 2018).
Fonterra has installed sensors and uses the internet of things for better management of the
operations. It has installed sensors at paddocks to analyze the moisture levels and the
fertilizing and composition of soils. The sensors at animals help in analyzing their fertility,
location, and health. It helps in capturing the agronomic data and aids the farmers in getting
accurate and deep insights (Fonterra, 2018).
The machine learning allows the farmers to undertake rational decisions for animal and farm
management and deriving the maximum outputs with minimum inputs. The inclusion of
automation and robotics has helped the company to transform agriculture and has helped the
farmers in quick inspection and monitoring of the pasture, water levels and livestock
(Fonterra, 2018).
Fonterra focuses on delivering virtual dairy farm experience through its headsets projecting
the 3D images and sounds to familiarise with the environment at Fonterra and showcasing the
ingredients used by the company to deliver unique experience (CIO, 2016).

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Recommendations
In order to advance the operation at Fonterra, the company must focus on adding the yield
algorithms to analyze the best things for the crops and maximize the crop yields. It must
focus on developing the chatbox for the farmers that will help in getting the right answers and
the analytics for applying the best technology and actively responding to the challenges in the
external environment (Hellingrath and Lechtenberg, 2019).
It must focus on the application of see and spray model to protect the crop from weeds. The
Blue river technology has established this model under which the company uses computer
vision to display and accurately spray weeds on the cotton plants. It must focus on the
application of Plantix that helps in detecting the deficiencies and the nutrition in the soil and
allows the company to maintain its edge over its competitors (Abraham, 2017).
The application of such models of artificial intelligence will help the farmer in improving the
logistics function through the efficient delivery of raw material and enriching the customer
experience through maintenance of the quality standards and short timing services (Abraham,
2017).
Current applications of artificial intelligence in the logistics function
of DHL
In order to improve the logistics function at DHL, the company applies cognitive automation
that helps the company in resolving the long-standing issues in the customs brokerage and
facilitates the shipment of goods across the geographical borders. It allows replacing the
clerical work with software robots and improves the accuracy of data and reduces the cost for
the company (Diallo, A., MacGillavry and Uhl, 2016)

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The company uses the AI-generated application known as predictive analysis to predict the
demand and optimize the routes. It allows the business to be proactive and enable more
proactive mitigation.
DHL has established a machine learning-based tool to forecast air freight transit time
interruptions in order to allow proactive mitigation. It allows the company to analyze 58
diverse factors of the internal data and predict the average daily transit time for the given
lane. It enables the company to develop an edge over its competitors by making an accurate
predictive analysis. The company uses AI-powered robots and autonomous vehicles to fulfil
the physical demand of logistics and will help in reducing fulfilment times while refining the
real-time prominence of the product demanded (DHL, 2018).
The company has used Amazon’s Alexa for delivering voice-based service to the end-users.
It allows the customers to track parcels and has provided the shipment information through
the use of this chatbox. It helps the company in delivering the personal touch and delivering
maximum satisfaction to the customers (DHL, 2018).
The company has recently launched a newly updated Smart Sensor temperature data logger
which focuses on providing temperature control packaging for climate sensitive products. It
has used Near field communication technology that ambient environmental temperature
conditions during the shipping of the products and possess the sensors that directly upload the
temperature data to the DHL app and has allowed the company to increase 40% of
operational capabilities through the use of these scanners. The company uses exponential
technologies to play a growing role in life science and is known for forward-thinking
provider (Overstreet, 2019).
It has also adopted new distribution technology known as radio-frequency identification tags
under which the company uses the radio waves to deliver and capture the information on the

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tag involved to the objects and allows triangulation of the location and flow of cargo to detect
the time of the container without the use of manual scanning. The company has adopted next-
generation weight and dimension technology that reduces the offloading time from hours to
six minutes and allows the company to decrease the cost of operation and advance the quality
of operations (Overstreet, 2019).
Recommendations
In order to advance the supply chain function, the corporation must focus on enabling the
data. The collective of the extensive data will help in improving the logistic activities and will
root out the waste at a more holistic level. It will aid in reducing the supply chain legs and
reduction of the warehousing cots (Dash et al, 2019).
The company must focus on multiple-purpose networks to handle the specialty function and
decrease the total supply chain cost. The company must develop a new logistics market that
will enable in delivering new services and overcoming the geographical and functional
segmentation and saving the cost of the company. DHL must focus on becoming an
information-driven business by capturing the big data and understanding the market
dynamics. It will bring operational efficiency by analyzing the crime hotspots and optimal
planning at the retail stores. Through capturing big data the company can analyze the
customer behaviour and may focus on delivering within a short time for retaining the trust of
the customers (Thiebaut, 2019).
Conclusion
From the above discussion, it is critical to note that the digitalization of the businesses has
developed the need to automate the operations of the business and enhance the customer

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experience by attaining efficiency in the logistics function. It is analyzed that the application
of artificial intelligence models aids in the structuring of the massive data and reduces the
error in the operations through accurate insights. It provides ease to the companies and helps
in increasing productivity through proper demand forecasting and inventory management.
It is observed from the above-mentioned paragraphs that Fonterra and DHL use various
artificial intelligence applications to improvise the supply chain function and maximize
customer satisfaction through a personal touch. Fonterra uses blockchain technology to
ensure transparency and traceability in the supply chain and has used the chatbox; sensors to
provide ease to the farmers in the production of raw material and improvise the quality
standards of the products.
Additionally, DHL uses various technological innovations and predictive analysis to analyze
the average delivery time and uses the robots to automate the delivery process. It improvises
the delivery time and ensures the safety of the products.

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